As the home ownership dream withers, long-term tenancies offer a win-win

Housemates Will Pasznyk and Riley Jackson, both 22, rent in Richmond because they can’t afford to buy there. Picture: Tony Gough

DEVELOPING more “build-to-rent” — or BTR — homes could be key to making long-term tenancy an attractive alternative for Melburnians priced out of the housing market.

More residents are renting for longer, but the option is still viewed as “the antithesis of the Great Australian Dream” and a short-term arrangement that precedes becoming a homeowner, industry experts say.

PwC partner Ross Hamilton blamed “weak tenancy laws” and the fact most rentals were owned by mum-and-dad investors for this outlook, as tenants were left too exposed to eviction.

The Victorian government is working on the former, having proposed 14 changes to the Residential Tenancies Act that would ban rental bidding and no-reason evictions, and allow renters to make minor modifications to properties and keep pets in reasonable circumstances, among other tenant-friendly reforms.

Renting is still largely viewed as “the antithesis of the Great Australian Dream” in Australia.

Legislation is expected to be introduced into parliament this year, although the reforms are strongly opposed by the peak body representing landlords and agents, the Real Estate Institute of Victoria.

The BTR model — in which unit developments are retained and rented out by institutional investors, like super funds or the developers themselves, rather than sold off to individual investors — could also help address that issue, Mr Hamilton said.

BTR developments would bring diversity to Melbourne’s housing supply, and an institutional landlord would seek to retain tenants “for a long-term steady income stream”, improving security of tenure, he said.

“(With) mum-and-dad investors … tenants can be displaced at short notice if the property needs to sell or if the owner needs to move back in.”

The BTR model, which is established in the US and UK, is expected to appeal to the growing demographic of young professionals who can’t afford a mortgage.

While prominent developers including Grocon, Stockland and Mirvac support the model, Mr Hamilton said domestic superannuation funds were key to boosting the sector in Australia.

Mr Hamilton said superannuation businesses had access to significant capital, and the main barriers they faced to becoming involved in BTR were manageable. These were making sure the returns stacked up compared to other investment choices, and overcoming the fact super historically had minimal involvement in Australia’s residential sector.

B Central Development Group director Tal Goldman, who owns one of Melbourne’s few sole-BTR developments, said he decided to offer all 36 apartments in his 405 St Kilda Rd, South Yarra project for rent rather than sale because it meant a “double income” stream of capital growth and rental returns.

Mr Goldman said “exorbitant” land taxes were hampering more developers from stepping into the sphere.

Beller Prahran head of leasing Luke Spence said all of the St Kilda Rd project’s homes had been leased out within about six weeks of being offered in 2016, with tenants drawn to the offer of long-term leases and flexibility when it came to requests like bringing in pets.

“(The owner) doesn’t get bogged down in things like that,” Mr Spence said.

“Half of the tenants have stayed since the beginning.”

Rent.com.au chief executive Greg Bader said the ability of tenants to be able to “treat their rental as their home” by putting up picture hooks and having pets was key to making renting a desirable long-term option.

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